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Chinese President Hu Jintao’s visit to Washington this week offers the Bush administration an opportunity to move beyond the U.S.-China chatfests. While the White House is set to focus on the usual issues of contention—the exploding bilateral trade deficit, currency manipulation, and China’s foot-dragging on North Korea and Iran—it is missing the opportunities, and in some cases new difficulties, presented by growing fissures within China’s domestic political system. The pace of China’s economic reform, as well as the future of its political system, is being questioned by that country’s elite. How China resolves these debates will have a profound impact on its relations with the United States. The Bush administration should move quickly to recalibrate its China policy to account for these domestic dynamics.

Hu is responsible for much of the domestic dissension that he must now negotiate. He and Premier Wen Jiabao have announced that under their leadership China will become a “harmonious society,” one that addresses the downside of the country’s rapid and uncontrolled growth: extraordinary income inequalities; skyrocketing pollution and environmental degradation; devastating corruption; and crises in the provision of health care, education and social security. Yet each year of their leadership there has also been a dramatic jump in social unrest: 58,000 protests in 2003, 74,000 in 2004 and 87,000 last year.

In acknowledging the challenges posed by China’s economic reforms, Hu and Wen have reignited a debate most Western observers had thought long dead.

Critics in China charge that the country is moving too rapidly toward a market economy, that foreigners are buying up too many Chinese assets and that additional sectors of the economy should only slowly be privatized and opened to foreign investment and ownership. Last month, approval by the National People’s Congress of a long-anticipated law enhancing the protection of private property was quashed at the last minute when conservative thinkers challenged its role in a socialist system. For the first time in a decade, party officials feel it necessary to defend the core principles of reform and opening up.

On the political front, debate is equally ferocious if not as public. Maintaining political stability has long been the primary objective of the party leadership, and over the past year Beijing has appeared increasingly desperate in its efforts to keep a lid on political dissent. Wary of the “color revolutions” in former Soviet republics, the Public Security Bureau is investigating domestic and international nongovernmental organizations for politically subversive leanings. The party has dusted off reeducation campaigns and is attempting to reinvigorate the teachings of Marxism-Leninism. In addition, there is the never-ending cat-and-mouse game between China’s determined Internet police and bloggers equally determined to speak freely.

Despite the apparent intensity of the crackdown, resistance keeps popping up—even without support from the outside world. Journalists who are removed from their positions refuse to be silenced, bloggers keep blogging and Chinese lawyers continue to defend those unjustly accused, even as they themselves risk arrest. Efforts to control dissent do not appear to be producing the intended result. Polls of party members reveal their belief that the most pressing problem they face is the need for more political reform, and the minutes of a meeting held at a government-affiliated think tank and leaked on the Internet last month show a prominent academic calling for a multiparty system.

The resolution of these debates rests overwhelmingly in Chinese hands. But the United States and the rest of the world can do more than sit on the sidelines. Market openness, transparency and the rule of law are all high-stakes issues for China and the international community. For starters, President Bush needs to reiterate clearly—both domestically and in talks with President Hu—the U.S. commitment to maintaining open borders for trade and capital. Political opposition to the buyout of Unocal Corp. by the Chinese National Offshore Oil Corp. and the cancelled Dubai ports deal, as well as proposed legislation to toughen the security review process for foreign investment in the United States, will strengthen the hand of those supporting similar practices in China and will undercut Washington’s ability to press the Chinese when they promote protectionist measures.

Already we have seen China’s Ministry of Commerce block the Carlyle Group from purchasing a majority stake in Xugong Group Construction Machinery Co. Moreover, Chinese officials have been calling for laws to prevent foreign firms from “monopolizing” sectors of the economy.

There also are steps the United States can take to promote greater transparency in China. So far the administration has remained above the fray that has engulfed technology companies doing business there, such as Google and Microsoft. But there is a real opportunity to work with these companies, which have publicly called for guidance, in developing codes of conduct to strike a balance between the real economic pressures that impel a corporate presence in the Chinese market and the need to protect the privacy and freedom of expression of users of the Web.

As debates on political reform continue within China, the United States can do more to support the development of civil society and the rule of law. In addition to the limited assistance the State Department provides for such programs, funds should come directly from the U.S. Agency for International Development. Currently USAID does not provide direct assistance for China programs on the grounds that the two countries do not share “values on human rights, religious freedom, and democracy” and “disagree on the best policies for Taiwan and Tibet.” But it is precisely because we differ on these values that the U.S. government should seek out whatever policy tools are available to promote these values and the institutions that would support them within China.

The Bush administration has it right in its efforts to encourage China to become a responsible stakeholder in the international system. But China’s ability and willingness to play that role will in large part be determined by how debates about the economy and reform are resolved. It is all the more important for the United States to seize the opportunity to help China continue toward a more open economic system and a more accountable political one. That is the most desirable outcome not only for the Chinese people but also for the rest of the world.

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